Introducing the Real World Asset Company ("RWA Co.")

This post was taken from our official blog, which can be found here.

TLDR: I’m starting a company to bridge the gap between the legacy credit markets and MakerDAO. I am going to start by helping loan originators and asset managers access the Protocol.

The (Whole) Backstory:

In 2010, two years after the financial world as we knew it had collapsed, the Fed announced QE2. This moment, at least for me, caused the realization that the response to the crisis was going to cause a tectonic shift in the global monetary regime. Regardless of one’s politics a new line had been crossed; the great fiat experiment would enter its next phase. In the midst of the chaos, on the forums I would peruse each day, a topic kept appearing - there was a new currency, one which might end US dollar hegemony and prevent further Central Bank interference by deferring management of the money supply to software. It was called Bitcoin.

This chance discovery propelled me down the rabbithole of decentralized architecture and monetary economics (something you learn ironically little about as an economics major). As Bitcoin’s narrative took root in the mainstream, a problem became apparent - while Bitcoin could replace the US dollar and even gold as the primary reserve asset of Central Banks, this was only part of the equation. Commercial banks, which with the exception of the Fed maintain an oligopoly on money, are the cornerstone of the fiat currency system - you couldn’t decentralize money without also finding a way to decentralize the machinations of the money creation process in a way that would not simply replace one too-big-to-fail entity with another. Over the next five years I’d watch with great enthusiasm as the public blockchain sector expanded, and in 2015 I would discover a community that would truly change my life, MakerDAO.

At this point myself and my business partner became very involved in the ethereum ecosystem and specifically with MakerDAO. This new application had the potential to solve all of the problems that Bitcoin could not. Yet MakerDAO itself had an achilles heel - its utility to society would be limited by its ability to source collateral, and its ability to source collateral was limited to the asset universe of ethereum. In order to serve a global market for cryptodollars (i.e. dollars created on the blockchain), Maker needed access to assets that exist outside of ethereum (or in crypto parlance, the “real world”). While most involved, including myself, would have preferred to keep MakerDAO isolated from assets that don’t rely on blockchain consensus mechanisms as the final arbiter of truth, the explosion of fiat-backed stablecoins in the system and the inherent limitations of crypto credit demand have made it apparent that high quality real world collateral is the most palatable path forward. By pursuing this goal with a cautious appreciation of its risks, we can grow the Maker Protocol to hundreds of times its current size and give the world the unbiased currency it deserves. Thus over the previous two years I have been researching and working towards connecting the legacy credit markets to MakerDAO. Now, with my previous position at the Maker Foundation made redundant through the ever-decentralizing force of the DAO, I am able to shift my attention to working on this task full time. So with that, I’d like to introduce the Real World Asset Company (officially RWA Company LLC and “RWA Co.” for short).

Our Mission:

RWA Co. seeks to assist loan originators and asset managers in accessing Maker Vaults. We intend to provide a full suite of services which will result in an experience that is similar to, and eventually simpler than accessing credit from a traditional lender. The Maker Protocol is structurally designed to offer the lowest cost of capital to borrowers. The entire money generation process is handled on-chain and the efficiency gains at each step of the process compound into structurally lower rates than current lenders are able or willing to offer. Additionally, Maker offers a key advantage to borrowers which is that fees accrue and are not necessarily due on a regular schedule. This liability deferral can be considered a subsidy to the final rate paid by the borrower. Current lenders are forced to follow cumbersome and outdated approval processes due to their opaque management structures and lack of technological innovation. RWA Co. will specifically help to advance the availability of capital to its clients by providing MKR holders the maximum amount of information at any given time (e.g. with automated and frequent reporting). Finally, terms at existing commercial lenders are often unnecessarily constricting. The Maker Protocol has the opportunity to keep terms both safe and flexible, starting from a blank slate.

Our Services:

RWA Co. will offer its clients a “full package” consisting of three distinct services. Please note that this menu is subject to change as the business evolves. These services are:

Representative Services

  1. Facilitation - As the client’s official Maker Representative Entity, RWA Co. will be responsible for acting on the client’s behalf in the Maker community. Expanding upon the initial concept of this role, RWA Co. will not simply represent but advocate for the client. We will post introductions, take meetings, and handle all pre-onboarding communications between the borrower and the Maker community. RWA Co. will be responsible for generating and filing all MIPs on behalf of the client. We will handle official communications with core units and ensure that deadlines are met. RWA Co. will ensure the needs of all core units are met by doing the “heavy lifting” in terms of information sharing.
  2. Signatory - Since the DAO cannot sign documents or engage third party contractors on its own accord, RWA Co. will act as the authorized signatory on documents related to its client’s Vault. RWA Co.’s role as signatory will be included in the MIP application and voted on by the MKR holders. Required signatures that both the DAO and the client cannot provide themselves includes but is not limited to Trust Agreements.
  3. Assurance - There is a large amount of information that, while critical to MKR holders assessment of the potential borrower, cannot be presented in a public forum. This information can be as simple as executed documents, where confidentiality clauses allow the client to only share drafts, or as complex as specific loan documents where good intent and correct manufacturing must be scrutinized and ensured. RWA Co. will act as a semi-trusted source to verify that (a) the information publicly presented by the borrower is accurate and (b) the detailed financials, intent, and underwriting procedures of the borrower are in good standing. We are in the process of contracting an independent auditor to monitor our processes in order to add a greater level of credibility (and accountability) to our operations.

Administrative Services

  1. Reporting - RWA Co. will submit a full report detailing the health of the client’s Vault and underlying business/portfolio at a frequency mutually agreed upon with the core units. This report will be as standardized as possible in order to maintain efficiency and scalability, but will be customized according to the business line of the client and the metrics outlined in the client’s MIP. We are in the process of building an API-based reporting infrastructure for maximum transparency and efficiency. We may also use third party technology like Tinlake where it makes sense. Technology is a core competitive advantage of MakerDAO and we won’t shy away from it.
  2. Cross-Entity Communications - RWA Co. shall commit to facilitating and transmitting any and all communications across the various entities involved in the onboarding, maintenance and offboarding of the client’s Vault. The primary communications that RWA will facilitate and transmit will be between the client and the DAO, and between the Trustee and the DAO. RWA will commit to transmitting these communications accurately and within 2 business days of their reception. We will confirm and record receipt upon reception to ensure compliance with the control points outlined with our independent auditor.
  3. Compliance - Loan originators and asset managers, by the nature of their business, must deal with heavy compliance requirements. To the best of our abilities, we will assist our clients in navigating any potential tax and regulatory issues that may arise from utilizing the Maker Protocol (note: we are NOT accountants or financial advisors and will not be providing tax or investment advice). We will also ensure that funds flow through regulated counterparties when necessary and that the client must only interface with the blockchain when absolutely necessary (if at all).

Consulting Services - The Consulting Package is the only package which can be purchased as a standalone from RWA. It is included in the “Full Package” where basis points on Dai outstanding are the primary form of fee, or available as its own service for a cash fee.

  1. Structuring - RWA Co. and its advisors have experience in understanding the structures that are best suited to interact with the Maker Protocol. While we cannot provide legal advice, we will guide the client to the most useful resources and information available.
  2. Relationships - Since RWA Co. acts as a connector of many counterparties, our network and relationships provide real value to our clients. We will make introductions and connections in order to ensure that our clients have the best experience and economics in their interactions with the Maker Protocol. These relationships include but are not limited to: Broker Dealers that are comfortable trading in Dai, Custodians that support Dai, Trust Companies that have worked with users of the Maker Protocol in the past, and outside counsel that is familiar with the intricacies of the Maker Protocol.
  3. Economic & Viability Analysis - The machinations of the Maker Protocol can be, at best, opaque to those not actively involved in the governance community. RWA will review the client’s current credit arrangements and cost of capital to see if using the Maker Protocol is a viable option. We will make this assessment on a best effort basis and the results of this assessment should not be considered financial advice. The output of this service will be an “Economic Viability & Analysis Report.” This report will be intended for the client to either (a) approve and allow us to advocate its contents to Maker governance, or should they have purchased the Consulting package as a standalone, to (b) approach Maker governance with our official recommendations.

If you are interested in learning more about the services we offer and want to better understand our pricing, please reach out.

Our Commitment:

I want to make something extremely clear - our commitment to the Maker community is to always put the best interest of the Protocol above our own. MakerDAO and its ecosystem is my passion, it represents so much more to me than just a business or a job. Aside from the fact that I am financially incentivized to keep the protocol running smoothly due to my holdings of MKR, it is the positive impact that I know Maker will one day have on the world that truly motivates me. This company will not be purely profit driven - I want to use this platform as an opportunity to give back, and that includes welcoming healthy competition. I’d rather have a smaller piece of a bigger pie. With that, RWA Co. intends to build its business around three core commitments to the Maker Community:

1. Quality

We will only bring high quality, experienced originators and managers to Maker Governance. Our clients will be an extension of our own reputation and I want you to be able to trust our due diligence. In addition to committing to only working with the best borrowers, we also commit to only supporting the best structures. We will only propose structures on behalf of our clients that we believe adequately protect all stakeholders in the Maker Community - Dai holders especially. I will be making a follow-up post shortly with some opinions on what a “minimum viable structure” should contain.

2. Transparency

The crisis in 2008 was caused by two factors - complexity and opacity. It has become my belief that complexity is a necessary component of any efficient system, and that only efficient systems can be competitive in the long run. However, opacity is inexcusable. We will ensure that all community members have equal access to client data whenever possible, and commit to reinvesting in technology in order to make it easier to consume this data. The first technological investment we will be making is an API to display client data.

3. Accountability

Our commitment is to present our client’s data to the greatest possible degree of accuracy and detail - and to put our own reputation on the line in making assurances regarding the compliance of data that cannot be made public. As I mentioned above, we will also be working with an independent auditor (at great expense) to bolster our own credibility. But most importantly, we are accountable to you for the accuracy of the data that we present and we will always go the extra mile to ensure that we are protecting your interests.

Our Vision:

The Maker Protocol has the opportunity to make the global financial system a better, safer place by injecting much needed transparency and neutrality into currency. For nearly four years it has been allowing anyone to generate their own peer-to-peer cash in a trustless and decentralized environment. But if we truly want everyone to be able to realize the dream that those of us in the DeFi space have been living, we need to cross the chasm and leave our comfort zones. Our vision is to have RWA Co. onboard billions of dollars of non-digitally native collateral into the Maker Protocol. However, we can’t do it alone. An explicit goal of this company is to set the bar high, demonstrate the financial opportunity, and encourage competition from the legacy financial sector. So with that in mind I ask for your support as we bring our clients into the ecosystem - please be open minded, please be critical but not oppositional, and please help us get there.

42 Likes

I was gonna say we’d better back the truck up. But we may need a bigger truck.

Exciting news!

wen token?

" always put the best interest of the Protocol above our own."

But if you are representing the client you (may by contract) have an obligation to put the clients interests over MakerDAO’s.

I think this is good but I think a rigorous approach needs to be taken to avoid Conflicts of Interest.

This isn’t the dynamic we’ll have with our clients. We primarily serve the MKR holders, it’s something they’re going to have to understand if they want to do business with us. That’s not to say we won’t try to get them a great deal, but we’ll never endorse a proposal we don’t think is good for the DAO. Also keep in mind that we’re not a gatekeeper, if they don’t want our help they can go directly to governance (prior to contracting us, of course).

Our goal is to build trust with the Maker community, and to do that we’ll need to be tough on our clients sometimes.

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Ok thank you,

I personally would like to see what precedent exists in the “Real World” where a client pays an advisor but the advisor is also acting in the counterparties interest.

The one example I could think of is a transactional broker in real estate. A broker which advises both sides.

The other example would be if theres an information barrier (wall). If thats the case youre modelling off then I think it should be made more clear.

Dont want to come off as too critical. Im still a fan.

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Real estate agents

Edit: Also arbiters.

Edit 2: Also brokers of financial products unless they’re fiduciaries. And brokers for buying/selling small businesses.

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Congratulations Greg! Does this mean I can introduce deals via RWA Co.?

BTW nice name.

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Arbiter is a good example.

I think brokers of financial products, if they are paid by the issuer, will place their interests first.

Gregs new business is necessary and smart but I wonder if the post needs to be reworded.

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Please send them our way if you find a good potential client!

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What about loan originators themselves? They need to appease their own bank more than their clients, generally. Go try to take out a mortgage and see whose “side” they’re on :sweat_smile:

Joking aside, it’s not in our interest to bring bad deals to the DAO. Our relationship with the community supersedes our relationship with the client because it is a prerequisite to us doing business.

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This is very cool! As someone with a MIP6 application under community review currently, we’ve gotten so much guidance (and many questions!) from @williamr, and this is a great value proposition.

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@g_dip Really excited to have a member of the Maker community, with understanding of protocol & governance dynamics, taking a step to work with the team in scaling the work we’re doing. Looking forward to collaborating :slight_smile:

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Congratulations on the new venture and I’m excited to see it succeed!

I think the originator’s obligation to the bank is a great example. By nature the originator is conflicted and the bank’s credit department is designed to resolve the conflict.

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Mini-announcement.

6s Capital LLC intends to contract / engage with RWA Company LLC to provide reporting services for the benefit of the DAO on a going-forward basis.

6s looks forward to helping the ecosystem grow with market participants!

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Hi, I am Erfan. a blockchain and infrastructure finance researcher. I am developing a framework for financing infrastructure projects using DAO. I think this company is pretty resonated with this kind of stuff. Is there anything you can help me with?

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I’ve DM’ed you

hi everyone,

Is there an list of companies that is part of the RWA. Are they integrated with the protocol to used dai…
Beside S6 capital and new silver. who is next ?

Hey, as far as I know, they are few companies on the pipeline and we are one of them (Reinno). We have prepared a simple trust(collateral agent) structure that is lighter and ready to go. Typically, most of the B2B lending is executed with a similar setup. Barriers are lower for other companies to reuse the setup, so we believe the future onboarding will be faster. We will provide more information and will share the first drafts of the documents as well as more detailed information regarding the structure in a separate thread. However, even though we are ready with the documents we have not gone thru the risk assessment yet.
I am optimistic about the RWA and MKR, it just needs some fine tunning:)

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